When the central bank controls the interest rate, the aggregate demand (AD) curve is downward sloping because:Group of answer choicesa reduction in the money supply (M) will cause an increase in the interest rate, a reduction in investment, and a reduction in output.a reduction in the aggregate price level (P) will cause the central bank to reduce the interest rate and thus increase output.a reduction in P will cause an increase in the real wage, a reduction in employment, and a reduction in output.as P increases, goods and services become relatively more expensive and individuals respond by reducing the quantity demanded of goods and services.

The aggregate demand curve _____ because a higher price level will cause the real money supply to decrease, the interest rate to increase, and investment to decrease.slopes downwardslopes upwardis verticalis horizontal

When the central bank keeps the interest rate controlled, a fall in its price target will immediately cause:Group of answer choicesthe LM curve to shift downward.the AD curve to shift leftward.the price setting curve to shift down.the wage setting curve to shift upward.the wage setting curve to shift downward.

The money demand curve is downward sloping because lower interest​ rates: a. lower the opportunity cost of holding money and cause households and firms to switch from financial assets to money. b. raise the opportunity cost of holding money and cause households and firms to switch from money to bonds. c. lower the opportunity cost of holding money and cause households and firms to switch from money to financial assets. d. raise the opportunity cost of holding money and cause households and firms to switch from money to shares.

If the aggregate demand curve (AD) presented in lectures is constructed by allowing the price level to vary in the IS/LM model with rate-setting monetary policy (i.e. an interest rate rule), then, ceteris paribusGroup of answer choicesthe price level and real income will not be inversely related because the rate of interest is kept constant under rate-setting monetary policylower price levels will be associated with higher levels of investment expenditurea rise in the target price level will lead to a leftward shift of the aggregate demand curvehigher price levels are associated with lower rates of interest and thus lower levels of income

Which of the following explain why the Aggregate Demand (AD) curve slopes downward?Multiple select question.The real-balances effectThe marginal effectThe foreign-purchases effectThe interest-rate effect